CIFF response – EU strategy to boost global climate and energy transition
The Chemical Industry of Finland aims to be nature positive carbon neutral industrial sector by 2045. According to the CIFF transition pathway, electrification, clean hydrogen, CCS/U, and new alternative carbon feedstocks have been identified to be important enablers in the successful transformation towards carbon neutrality. Therefore, in the future, the chemical industry will require a huge amount of alternative raw material sources, to replace virgin fossil raw materials and energy. Alternative carbon sources include all captured carbon dioxide, recycled/reused carbon (waste), and sustainable bio-based carbon sources.
Unfortunately, the current EU regulatory framework hardly creates any viable business case for investments and especially transition pathway investments. The incompleteness of legislation and current flaws slow down the transition and at worst remove the feasibility of investments. In addition, the cost difference between virgin fossil raw material and alternative raw material is often a significant obstacle.
The legislation must support the competitiveness of the industry as well. At the moment there is a high risk that, emissions might simply shift to other regions, through carbon leakage, along with investments and jobs, undermining both European climate leadership and economic resilience.
The competitive industry and successful transition need to go hand in hand when deciding future legislation framework and therefore the following issues need to be fixed:
- The EU must develop a sufficient comprehensive Circular Carbon Strategy that covers all alternative carbon cycles (recycled, bio, (B)CCU)
- New market incentives should be developed for products based on alternative carbon sources. (e.g. Mandatory targets for the use of non-virgin fossil feedstocks on chemical industry level)
- Existing legislation must be amended to recognize and support alternative carbon sources.
- Different legislative sectors, such as waste, climate, and product safety regulations must be harmonised to recognise all alternative carbon sources and support carbon cycles
- One unified ”Sustainable Carbon” definition, covering all alternative carbon sources, needs to be adopted across all policy areas.
- Funding and subsidies are crucial to accelerating massive investments.
- Hydrogen definitions and legislation must be clear and support the transition
- The Energy Taxation Directive should ensure the competitiveness of industry and especially fair tax treatment for electricity, hydrogen, and climate-friendly fuels.
- The Emissions Trading Directive (ETS) and carbon border mechanism (CBAM) must ensure adequate investment leakage and carbon leakage protection for industry
- CO2-emissions should be correctly calculated in all circumstances. E.g. the current requirement for permanent product leads to double counting.
- Negative emissions should be accounted. Carbon removal certificates could potentially be used for this purpose.
- The carbon leakage protection must also cover exports from Europe. (CBAM)
- For exports outside the EU, not covered by the CBAM mechanism, full ETS emission allowances should be granted
- Potential extension of the CBAM mechanism should be carefully assessed with the relevant industrial sectors
- Sufficient transition period is needed for the new sectors in the future CBAM extensions.
- Reporting requirements should be designed to minimize additional bureaucracy.
- The state aid rules for emission trading compensation should be reviewed and expanded to comprehensively cover electricity-intensive chemical industry.
- EED: The energy consumption cap should be removed.
- Nuclear power should be recognized better and accepted as a key climate-friendly energy technology.
- RED: It is crucial to favor all renewable and low-carbon investments as widely as possible and not inadvertently hinder investments by favoring various technologies too restrictively.
